Act on the Auditor General and the auditing of government accounts no. 46, 25 May 2016
CHAPTER I. Election and role of the Auditor General
Article 1. Auditor General and the National Audit Office
The Auditor General works under the auspices of the Althingi. The Auditor General is an agent of the Althingi and is accountable to the Althingi as regards auditing and oversight of the operations and finances of the State.
The office of the Auditor General, which the Auditor General administers, is known as the National Audit Office
The Auditor General is independent and autonomous in his work and decides alone on the manner of discharging his duties under this Act.
Article 2. Election of the Auditor General
The Althingi shall elect the Auditor General for a term of six years. The Auditor General shall possess knowledge of financial accounting and central government operations, in addition to administrative experience; the Auditor General shall not be a Member of Parliament. The Speakers’ Committee shall nominate a candidate at the election. Other nominations from Members of Parliament shall be delivered to the Speaker of the Althingi in sufficient time to ascertain eligibility prior to the election. The Auditor General may be re-elected once.
In the event of the death of the Auditor General or incapacity to discharge his duties during his term of office the Althingi shall elect a new Auditor General. The same applies if the Auditor General is released from office at his own request or a two thirds majority of members of parliament vote to remove him from office.
On the temporary absence of the Auditor General his deputy, appointed as provided in the second paragraph of Article 19, shall occupy his office during his absence.
Article 3. Role
The role of the Auditor General is to oversee the finances of the State, its institutions and State enterprises under a mandate from the Althingi, as further provided in this Act. In his work the Auditor General shall monitor the revenues of the State and observe whether appropriations and assets are used and allocated in an efficient and proper manner in accordance with the conditions and decisions of the Althingi.
The Auditor General shall inform the Althingi and the government, of any affairs relating to the operations and finances of the State, uncover any deviations from law and rules in that regard and submit proposals for corrective actions, improved administration, clearer accountability and better use of State funds.
CHAPTER II. Auditing and surveillance
Article 4. Functions of the Auditor General
The functions of the Auditor General include:
- Auditing the government accounts and the annual accounts of State entities included in Group A of the government accounts, as provided in the Public Finance Act, where expenses are paid out of the State Treasury in accordance with the State Budget;
- Auditing the annual accounts of funds and state enterprises operating under a State guarantee;
- Auditing the annual accounts of limited liability companies and partnerships where the State owns a 50% share or more;
- Overseeing the execution of contracts made with municipalities or private entities;
- Auditing and overseeing projects and activities entrusted to the National Audit Office pursuant to other acts of law;
- Auditing of the annual accounts of international organisations of which Iceland is a member, where applicable;
- Overseeing the operations and performance of state entities;
- Assisting in the work of parliamentary committees relating to the financial affairs of the State, including oversight of the enforcement of the Budget Act.
The Auditor General may also decide to review the interim financial statements of the parties referred to in the first paragraph, as applicable.
The Auditor General shall appoint an independent chartered accountant or accounting firm to audit the accounts of the Althingi.
Article 5. Financial audit
A financial audit conducted by the Auditor General shall take account of the following:
- That financial accounts give a true and fair view of the operation, financial position and changes thereto in conformity with the statutory financial reporting framework for public entities;
- The examination of internal controls and whether such controls ensure appropriate results;
- Whether the accounts and scope of activities are in compliance with the fiscal budget, the supplementary fiscal budget and other acts of law, lawful instructions, contracts and procedures, as appropriate
Article 6. Performance audit
A performance audit consists in assessing the performance of parties under the surveillance of the Auditor General. The objective of a performance audit is to promote improvements, principally with regard to the following:
- The disposal and use of State funds;
- The observance of principles of effectiveness and efficiency in the operation of government agencies and State-owned companies;
- Whether State allocations are achieving their intended results.
In assessing performance, items for consideration shall include whether operations are in line with budget limits, applicable acts of law and generally accepted practices.
A performance audit can also include assessment of compliance by public authorities with programmes, stipulation of law and obligations regarding environmental affairs.
Article 7. Outsourcing
The Auditor General is permitted to assign to auditors, auditing firms and other professionals work under his authority relating to individual functions that are assigned to the Office.
The Auditor General is permitted, prior to an annual general meeting or annual meeting of a company in the majority ownership of the State, to appoint an auditor or auditing firm to undertake the audit of companies falling within the scope of point (c) of the first paragraph of Article 4. The selection of an auditing firm or auditor shall be decided in consultation with audit committees, as applicable.
A party entrusted with the audit of a company pursuant to the second paragraph shall provide the National Audit Office with information and data relating to the conduct of the audit as further decided by the Auditor General.
Article 8. Fees
The Auditor General is permitted to charge a fee for financial audits of the annual accounts of parties under his surveillance, with the exception of institutions falling within Group A of the Government Accounts, cf. the Public Finance Act, which covers the cost of the audit.
In special circumstances, and where it is necessary for the Auditor General to inspect or review the use of State funds in a specific matter or a specific area, the Auditor General is permitted to charge a fee.
Article 9. Standards and procedures
An audit shall be carried out in accordance with generally accepted auditing standards and rules of procedure that apply to the auditing of public entities, as applicable. The Auditor General shall publish on his website the standards and rules of procedure, or references to them.
CHAPTER III. Access to accounts, documents and information
Article 10. Powers of inspection
The Auditor General may require accounts, information and data from parties falling within the scope of his surveillance and parties receiving funds or guarantees from the State, including information on the use of the funds.
In order to verify the substance of submitted invoices and the payment obligation of the State, the Auditor General shall have access to source materials or reports that are entered concurrently with invoices made out to the State for work or services on the basis of law, work contracts or tariff contracts with individuals, companies or institutions.
The Auditor General is authorised to inspect the accounts of municipalities to the extent that they concern joint operations of the State and municipalities. Furthermore, the Auditor General is authorised to inspect the accounts of institutions and companies in which the State holds a share.
In the event of a dispute regarding the powers of inspection of the Auditor General, the Auditor General may seek a ruling from the courts of law.
Article 11. Access to documents and information
In his work the Auditor General shall have access to all relevant documents, including accounts, source documents, reports and correspondence. Furthermore, the Auditor General may require information and documents that are of potential significance for his work.
The Auditor General shall decide where and when audits are conducted. When a decision is made that an audit should be conducted at the offices of a party that is subject to surveillance by the Auditor General, such party is required to provide all necessary facilities for the audit to take place.
The Auditor General may grant a reasonable deadline to submit documents and information relating to an audit or other surveillance on his part or to respond to comments made regarding accounts, safeguarding of assets and operations.
The Auditor General may seek the assistance of the police in special circumstances, in which case the police are required to provide assistance upon request.
CHAPTER IV. Rules of procedure
Article 12. Confidentiality
The Auditor General is required to keep in confidence any incidents that come to his knowledge in the course of his work and are confidential for reasons of public or private interests. The same shall apply to the Auditor General’s staff and others working on his behalf.
The obligation of confidentiality shall remain in effect even after termination of employment or completion of a task. Persons involved are not permitted to use the information referred to in the first paragraph in their own activities or in the service of others.
Information and documents which are subject to confidentiality may be disclosed to parliamentary committees and expert advisors to the extent necessary. In such an event the party to whom the information is disclosed shall be subject to confidentiality.
The provisions of this Article shall not prevent the Auditor General from publishing information which otherwise would be subject to confidentiality if the Auditor General considers this to be necessary to rationalise his conclusions. However, information concerning the personal affairs of individuals, including their financial affairs, shall only be published if the public interests outweigh the interests of the individual in question.
Notwithstanding the provisions of the first paragraph, the Auditor General is permitted to provide information to the police and disclose documents in the interests of the investigation of a criminal matter. The Auditor General shall notify the police of any criminal conduct that comes to his attention in the course of his work. The Auditor General may also co-operate with investigation commissions pursuant to statutory law on investigation commissions and other supervisory authorities. Information provided by an individual to the Auditor General cannot be used as evidence in criminal proceedings instigated against the individual.
Article 13. Qualifications
The Auditor General and persons employed by or working for the National Audit Office are not permitted to undertake auditing and supervisory work pursuant to this Act:
- For parties to which they are related in the manner described in points 1-3 of the first paragraph of Article 3 of the Administrative Procedure Act;
- If in other respects there are circumstances that could justify doubt regarding impartiality.
The provisions of point 5 of the first paragraph of Article 3 of the Administrative Procedure Act regarding the consequences of disqualification of subordinate employees for their immediate superiors apply to the employees of the National Audit Office.
The Auditor General shall rule on his specific qualifications and those of others working for the National Audit Office. In the event of any dispute regarding the specific qualifications of the Auditor General the Speaker of the Althingi shall decide.
If the Auditor General considers himself to be disqualified from considering and acting on a specific matter he shall withdraw from its investigation, in which case the Speaker of the Althingi shall appoint an Acting Auditor General to address the matter. The Acting Auditor General shall meet the same requirements that are made of the Auditor General in the first paragraph of Article 2.
Article 14. Right to comment
Persons under investigation or surveillance by the Auditor General shall be sent drafts of reports and submissions for comment. At the end of a financial audit the parties concerned shall be sent drafts of the auditor’s report for comment if it includes any critical findings. The Auditor General shall grant a reasonable deadline for comment.
Article 15. Access to documents in the National Audit Office
Any request for access to documents that a governmental authority or other regulated party has delivered to the Auditor General shall be forwarded to the governmental authority or party in question.
If access is requested to documents which have been created in communications between the Auditor General and a regulated party, such access to the documents at the National Audit Office shall be subject to the provisions of the Information Act or the provisions of legislation on rights to information or on environmental affairs, as applicable.
Reports, memoranda and other documents prepared by the Auditor General which form a part of a matter that the Auditor General intends to present to the Althingi can only become accessible after they have been delivered to the Althingi. Exempt from access are drafts of such documents that have been sent to parties for information purposes or for comment. The Auditor General can also decide that documents that have been sent to government authorities in the course of preparing specific investigations and in the course of the investigations themselves should not be made available.
Decisions of the Auditor General regarding access to documents cannot be referred to the Information Committee.
CHAPTER V. Reporting and disclosure
Article 16. Disclosure of Information
The Auditor General shall, by means of reports, memoranda and audit letters to the parties falling within the scope of his work:
- Provide an account of the conclusions of his audits and surveillance;
- Draw attention to matters that in his opinion have been deficient as regards activity, financial management and operation;
- Point out matters that in his opinion require attention and make proposals for improvements.
If the Auditor General, in the course of his work, becomes aware of significant improprieties or irregularities on the part of an entity falling within the scope of his work the Auditor General shall always have the option of submitting a special report on the matter to the Althingi and, as appropriate, to the Cabinet Minister in question.
The Auditor General shall submit his reports, memoranda and audit letters to the Althingi and publish them, except in the case of matters that are subject to confidentiality pursuant to law and when public or private interests preclude such publication, subject to the provisions of the fourth paragraph of Article 12.
The Auditor General may refer matters to police investigation if warranted, see the fifth paragraph of Article 12.
Article 17. Formal request by the Althingi for a report
The Constitutional and Supervisory Committee of the Althingi may, on its own initiative or pursuant to a proposal received, request that the Auditor General prepare a report on specific matters or issues falling within the scope of his work. The same shall apply if nine Members of Parliament so require by means of a formal request for a report submitted at a plenary meeting of the Althingi, in which case the request shall be tabled.
If the Auditor General takes such a request under consideration he shall notify the Constitutional and Supervisory Committee of the scope of the report and estimated time of completion. If it is revealed that the scope of the investigation is significantly more extensive than estimated, or if a report cannot be completed at the appointed time, the Auditor General shall inform the Constitutional and Supervisory Committee and submit his proposals regarding the matter.
Article 18. Annual report
An auditor appointed by the Speakers’ Committee of the Althingi shall audit the annual accounts of the National Audit Office.
The audited annual accounts and report on the work of the Auditor General shall be published on the website of the National Audit Office.
The report on the work of the Auditor General in the preceding year shall be submitted to the Althingi.
CHAPTER VI. Further provisions
Article 19. Terms of employment of the Auditor General etc.
The Speakers’ Committee of the Althingi shall decide on the salary of the Auditor General. The Auditor General is entitled to severance pay when he retires from his office in accordance with Chapter VI of the Government Employees Act.
The Auditor General shall appoint the staff of the National Audit Office. He shall select one of the employees as his deputy in absences. However, the appointment of the deputy shall be confirmed by the Speakers’ Committee.
The Government Employees Act shall apply to the employees of the National Audit Office.
The Speaker of the Althingi shall negotiate wage term contracts with employees of the National Audit Office, as provided in Article 3 of the Act on the collective wage bargaining contracts of civil servants.
Article 20. Membership of international organisations
The Auditor General shall decide on the membership of the National Audit Office of international organisations of supreme audit institutions and other organisations, as necessary for the international co-operation of the Office. The Auditor General is also authorised to implement auditing standards approved by the organisation. In the course of such implementation it shall be ensured that individual standards are applicable in Icelandic circumstances, as appropriate.
Article 21. Scope of application as regards the Act on auditors
The Auditors Act, No. 79/2008, does not apply to the Auditor General or the National Audit Office. The provisions of the Act apply to the employees of the National Audit Office who undertake the auditing of annual accounts of funds and State enterprises where the State holds a 50% share or more and where auditing by an auditor falling within the scope of the Auditors’ Act is required by law. In lieu of professional liability insurance pursuant to Article 6 of Act No. 79/2008, the Auditor General shall notify the Auditors’ Council of the employees of the National Audit Office who are subject to the provisions of this Article and that the Office is accountable for their work.
Article 22. Entry into force, etc.
This Act enters into force on 1 January 2017. As of the same time, the National Audit Act, No. 86/1997, as subsequently amended, stands repealed.
The provisions of the first paragraph of Article 2 shall take effect following the term of office of the current Auditor General.
Article 23. Amendments to other Acts
On the entry into force of this Act, the following amendments to other acts of law will take effect:
- The second sentence of the second paragraph of Article 9 of the Act on the Civil Servants’ Pension Fund, No. 1/1997, shall read as follows:
The annual accounts of the Fund shall be audited by the Auditor General.
- The second sentence of Article 6 of the Act on the Nurses’ Pension Fund, No. 2/1997, shall read as follows: The annual accounts of the Fund shall be audited by the Auditor General.